Quick Answer: What Is The Gilti Tax?

What is Gilti?

GILTI is a newly-defined category of foreign income added to corporate taxable income each year.

In effect, it is a tax on earnings that exceed a 10 percent return on a company’s invested foreign assets.

GILTI is subject to a worldwide minimum tax of between 10.5 and 13.125 percent on an annual basis..

Who does Gilti apply to?

The GILTI rules (contained in the new section 951A) require a 10 percent U.S. shareholder of a controlled foreign corporation (CFC) to include in current income the shareholder’s pro rata share of the GILTI income of the CFC. The GILTI rules apply to C corporations, S corporations, partnerships and individuals.

What is the difference between Subpart F and Gilti?

In contrast to a subpart F income inclusion, a US shareholder’s GILTI Inclusion is based on the aggregate of the shareholder’s pro-rata share of certain items (e.g., tested income, tested loss and qualified business asset investment (QBAI)) from all the CFCs in which the shareholder is a US shareholder for that year.

What form is Gilti reported on?

About Form 8992, U.S. Shareholder Calculation of Global Intangible Low-Taxed Income (GILTI) | Internal Revenue Service.

What type of income is Subpart F?

In general, it consists of movable income. For example, a major category of Subpart F income is Foreign Base Company Income (FBCI), as defined under I.R.C. § 954(a), which includes foreign personal holding company income, or FPHCI, which consists of investment income such as dividends, interest, rents and royalties.

What is 951 A Income?

Section 951(a)(1)(B) of the Code provides that, if a foreign corporation is a CFC for an uninterrupted period of 30 days or more during a taxable year, every person who is a United States shareholder of the corporation and who owns stock in the corporation on the last day of the taxable year in which the corporation is …

What is the Gilti tax rate?

10.5 percentSo, Congress added a new 10.5 percent minimum tax on global intangible low-taxed income (GILTI) to discourage such profit shifting. GILTI is intended to approximate the income from intangible assets (such as patents, trademarks, and copyrights) held abroad.

How do I report Gilti income?

Reporting GILTI Inclusion For an individual taxpayer, the GILTI inclusion will be reported on the “other income” line of the Form 1040 and taxed at the ordinary income tax rate.

Is Gilti subpart F income?

To be consistent with the statute, the final GILTI regulations issued on June 21, 2019, provided that the exclusion of high-taxed income from tested income under the GILTI rules applies only with respect to income that otherwise would have been taxed as Subpart F income solely but for the application of the high-tax …

Does Gilti apply to partnerships?

Under proposed regulations, a US partnership could be considered a US shareholder of a CFC. Accordingly, the GILTI inclusions were to be calculated at the partnership level and reported on each shareholder’s Schedule K-1. … Now, GILTI is calculated at the partner or shareholder level, rather than the partnership level.

Is subpart F income taxable?

For purposes of subsection (a), the subpart F income of any controlled foreign corporation for any taxable year shall not exceed the earnings and profits of such corporation for such taxable year.

How do you calculate Gilti?

The IRS expects to finalize the regulations soon. The calculations for GILTI inclusion amount are primarily driven by this formula: GILTI inclusion amount = net CFC tested income – NDTIR. There are many defined terms and other supporting formulas in order to understand how to use this primary formula.